How the ACA Replacement Plan Could Affect Your Wallet

Q. If this plan to replace the Affordable Care Act (also known as Obamacare) becomes law, can people 50 and up expect higher health insurance premiums?

A. It’s not even a formal bill yet, and it may never become so. But if a leaked draft of a possible replacement for the Affordable Care Act reflects what some lawmakers have in mind, you’d better start saving up if you buy health insurance on your own. Two provisions in the plan would drive up health insurance costs by thousands of dollars a year for most older beneficiaries.

First, like another proposal of a few weeks ago, this one would allow insurers to charge their older customers up to five times as much as younger customers for the same health plan. The current law limits the differential to three to one.

This change alone would increase a typical annual premium by $2,592 for a mid-range Silver plan for a 60-year-old, according to a new analysis by Milliman, an international actuarial firm.

Fixed tax credits

But that’s not all. The draft bill does away with the income-based tax credit that, for 85 percent of people buying through their state marketplaces, effectively caps their premium at a set percentage of their income. Instead it offers fixed tax credits that increase with age, regardless of income—everyone from paupers to billionaires would get the same amount.

The annual credits would be:

• $2,000 up to age 30

• $2,500 from 30 through 39

• $3,000 from 40 through 49

• $3,500 from 50 through 59

• $4,000 age 60 and above

Under the current law, a 60-year-old earning $45,000 is entitled to a tax credit that caps his or her annual premium outlay at $4,360 a year for a “benchmark” Silver plan. If the plan costs $12,000 a year the tax credit is enough to make up the difference between the premium cap and the actual premium—in this case, $7,640.

Under the draft Obamacare replacement, that $7,640 tax credit would shrink to $4,000. Meanwhile, the premium would go up to about $14,500 a year because of the expanded age band.

The bottom line

Under the replacement proposal, our 60-year-old’s annual outlay for health insurance premiums would go from $4,360 to about $10,500 per year.

Another group of older adults would end up slightly better off, however: those who make too much money to qualify for tax credits under the Affordable Care Act. This year, the cutoff is $47,520—any 60-year-old who earns more than that is paying the full $12,000 premium. But they’d now all have that $4,000 tax credit available to knock the total, higher premium down to $10,500 a year.

In future articles we’ll look at other aspects of various ACA replacement proposals.

Nancy Metcalf is an award-winning independent journalist specializing in health topics. A senior writer and editor for Consumer Reports for more than 25 years, she is a nationally recognized expert on health insurance and health reform.